Instructions to Candidates:
The coursework resit paper comprises THREE compulsory Questions.
Question 1
You are provided with the following financial statements for AA Ltd, BB Ltd and CC Ltd.
Statements of financial position as at 31 March 2020
AA BB CC
£000 £000 £000
Non-current assets
Property, plant & equipment 45,000 20,000 2,000
Investments:
£1 ordinary share in CC at Cost 5,025
£1 ordinary shares in BB at cost 20,000
70,025 20,000 2,000
Current assets
Inventory 7,000 2,000 500
Receivables 9,000 5,000 100
Bank 8,000 800 200
24,000 7,800 800
Total assets 94,025 27,800 2,800
Equity & liabilities
Equity
Ordinary Share Capital 40,000 10,000 1,500
Retained earnings 20,025 5,000 500
60,025 15,000 2,000
Current liabilities
Payables 25,000 11,000 500
Tax 6,000 1,000 300
Dividends payable 3,000 800 0
34,000 12,800 800
Total equity & liabilities 94,025 27,800 2,800
The following information is also available:
- a) AA purchases 100% of the £1 ordinary shares in BB on 1 January 2011 which have not changed since acquisition. At that date BB’s retained earnings were £3,500,000.
- b) AA purchases 40% of the £1 ordinary shares in CC on 1 January 2011. At that date CC’s retained earnings were £200,000
- c) During the year BB sold goods to AA for £250,000 costing £150,000 and they all remain in inventory as at the year end.
- d) The goodwill arising on consolidation for BB has improved by 25% since acquisition.
Required:
Prepare a Consolidated Statement of financial position for the year ending 31 December 2020. 50 Marks
Question 2
You are provided with the following financial statements for TIMBERLAKE Ltd.
Statement of comprehensive income for the year to 31 December
2020 2019
£000 £000
Revenue 5,327 3,725
Cost of sales 4,420 2,905
Gross Profit 907 820
Operating Expenses 87 75
Profit before interest & taxation 820 745
Interest payable 130 20
Profit before taxation 690 725
Taxation 215 225
Profit for the year 475 500
Statement of financial position at 31 December
2020 2019
£000 £000 £000 £000
Assets
Non-current assets 5,120 4,700
Current assets
Inventories 1,334 730
Trade receivables 1,278 596
Bank 11 2,623 400 1,726
7,743 6,426
Equity
Ordinary share capital 2,000 2,000
Retained earnings 3,508 3,433
5,508 5,433
Liabilities
Non-current liabilities
Bank loans 1,000 150
Current Liabilities
Trade payables 1,020 618
Taxation 215 225
Bank overdraft – 1,235 – 843
7,743 6,426
Assume all purchases and sales are made on credit terms.
Required:
Write a report discussing the performance of TIMBERLAKE. Your report should have an appendix that includes for both 2019 & 2020: three profitability ratios, three liquidity ratios, three efficiency ratios and one gearing ratio for TIMBERLAKE Ltd. You may also consider making recommendations regarding TIMBERLAKE Ltd. 30 Marks
Question 3
3a. Define the term “revenue”. Also explain the “five-step model” for the recognition and measurement of revenue which is set out in international standard IFRS15.
8 Marks
ABC is contracted to build a tower for a wealthy Gulf customer. The contract price is £50m but the contract stipulates that the company will receive an incentive payment of a further £10m if the asset is completed by the end of 2018. However, the company will incur a penalty of £10m if the asset is not completed by the end of June 2019.
The company estimates that the probability of completing the asset by the end of 2018 is 25% and the probability of not completing the asset by the end of June 2019 is 5%
3b. Determine the transaction price for this contract 12 Marks
END OF PAPER
100 marks
